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Skype founders quit as executives Ebay cuts back its value of Skype
(about 7 hours later)
The founders of Skype, Niklas Zennstrom and Janus Friis, have resigned as executives of the web-based phone firm. EBay has conceded that it paid too much for internet telephone service Skype - dramatically writing down the value of its investment.
EBay has announced that it will cut up to $1.2bn (£590m) off the potential price it agreed to pay for Skype. The online auction firm said it would take charges of $1.43bn (£699.5m) on the 2005 purchase, when it paid $2.6bn for the business.
In September 2005 eBay agreed to pay $2.6bn for Skype and make further payments of up to $1.7bn based on Skype meeting various targets. About $900m is a write-down of value with $530m to settle future obligations to some shareholders.
EBay will reduce the value of Skype on its books by $900m, a tacit recognition that it overpaid for the company. Skype founders Niklas Zennstrom and Janus Friis have quit as executives.
"I think this is a testament that the Skype franchise is not worth as much as eBay originally thought," said Youssef Squali of the brokerage Jeffries & Co."I think this is a testament that the Skype franchise is not worth as much as eBay originally thought," said Youssef Squali of the brokerage Jeffries & Co.
Skype generated only $90m in revenue in the three months to the end of June. Skype generated only $90m in revenue in the three months to the end of June, eBay said.
Other projectsOther projects
Ebay said it might pay Skype shareholders another $195m, but only if it sells 50% or more of Skype before then end of March 2008. At the time of the purchase, eBay had said it may pay up to $1.7bn on top of the $2.6bn, depending on performance.
News that this would not happen sent its shares up 1.6% to an 18-month closing high.
If you take Skype out of the equation, the rest of the eBay business seems to be doing great again Steve Weinstein, Pacific Crest Securities
Analysts said that this also reflected the greater flexibility eBay may now have, following the change in personnel.
However, eBay said it might pay Skype shareholders another $195m, but only if it sells 50% or more of Skype before the end of March 2008.
Mr Zennstrom, who was chief executive of Skype, will become non-executive chairman and is expected to spend more time on other projects.Mr Zennstrom, who was chief executive of Skype, will become non-executive chairman and is expected to spend more time on other projects.
After the Skype sale, he and Mr Friis founded an online video company called Joost.com.After the Skype sale, he and Mr Friis founded an online video company called Joost.com.
Joost, which had previously only been available by invitation, made its software freely available on Monday.Joost, which had previously only been available by invitation, made its software freely available on Monday.
Analysts said that while Skype had not made a lot of money, eBay itself remained a strong business.
"If you take Skype out of the equation, the rest of the eBay business seems to be doing great again," said Pacific Crest Securities analyst Steve Weinstein.
"EBay management has found ways to re-accelerate the core (auctions) market. Lots of its businesses are doing extremely well."